Beware Pension Scams

Pension scams are on the increase in the UK. ‘One-off pension investments’, ‘pension loans’ or upfront cash offers are being used to part savers from their money. Read this guide to find out how to spot pension scams.

What is a pension scam?

If you’re 55 or over you can legally access the money in your pension scheme(s). But if you are under 55, normally you can’t. Pension scams, also known as ‘pension loans’ or ‘pension liberation fraud’, is the transfer of your pension savings to an arrangement that will allow you to access your money before the age of 55. In the majority of cases, these offers are bogus and you will probably lose most, if not all, of your savings.

Accessing pension savings before 55 is only possible in rare cases, such as very poor health. An increasing number of companies are targeting savers claiming they can help them take their pension savings early. This can result in tax charges of more than half of the value of the money you take out. Those being targeted are usually not told about the potential tax implications.

This is in addition to high charges, typically 20% to 30% for entering into one of these arrangements and as well as high risk investments for the remaining pension savings.

How to spot a pension scam

New rules which came into effect in March 2014, and proposed new rules from April 2015 mean you will have more choices about how you access your pension pot than you did in the past. Read our guide New rules about pensions from 27 March 2014 for more information.

However, all of these new rules normally only apply to people aged 55 or over.

Unfortunately the advent of these new rules has sparked off new scams and some fraudsters are suggesting the government has asked them to contact you. We’ve even heard of some fraudsters saying they are from the Money Advice Service. Rest assured we will never contact you direct about this. If you receive a call claiming to be from us – or the government – put the phone down.

Pension scams can take many forms and will often appear to be legal. Watch out for these common features of a pension scam:

• Being approached out of the blue over the phone, via text message or in person door-to-door.
• Pushy advisers, often unregulated, who claim to be able to help you access your pension before age 55.
• Companies that offer a ‘loan’, ‘saving advance’ or ‘cashback’ from your pension.
• Any reference to ‘loopholes’, overseas investments, creative or new investment techniques.
• Being encouraged to speed up transfer of money to a new scheme.

Often scams are presented as unique investment opportunities for your pension savings, and some companies will get your attention by offering a free pension review. You will be encouraged to transfer your pension quickly, and they may even send documents to you by courier.

Once you’ve transferred your pension, it’s too late. Many victims have lost their entire pension savings. Even if you don’t lose your money, you could be asked to pay a large tax bill on top.

What to do if you think you’re being targeted

• Never be rushed into making a decision.
• Make sure the adviser is registered at fca.org.uk/register before you agree to anything and is offering regulated advice.
• Before you sign anything, call The Pensions Advisory Service on 0300 123 1047 for more information on pension scams.
• If you have accepted an offer, raise the alarm by calling Action Fraud on 0300 123 2040.

It is important to check the facts before any irreversible decision is made, as a lifetime’s savings can be lost in a moment. For examples of real life scams, read this leaflet (PDF 1MB).

This article is provided by the Money Advice Service.